International Money Express, Inc. annual report, FY2022

International Money Express, Inc. — FY2022 Form 10-K

Reporting period: Fiscal year ended December 31, 2022. This is an annual report; the supplied filing text does not provide a separate fourth-quarter income statement. Intermex operates an omnichannel money-transfer business primarily serving U.S.-to-Latin America and Caribbean corridors, with digital channels and operations extending to Canada, Africa and Asia.

Key financial results

Metric	FY2022	FY2021	Change
Total revenue	$546.8 million	$459.2 million	+19.1%
Operating income	$82.9 million	$67.9 million	+22.2%
Net income	$57.3 million	$46.8 million	+22.4%
Diluted EPS	$1.48	$1.20	+23.3%
Operating cash flow	$15.2 million	$78.1 million	Down $62.9 million

• Revenue comprised $469.2 million of net wire-transfer and money-order fees, $72.9 million of foreign-exchange gain and $4.7 million of other income. Transaction volume increased 19.2%; principal sent rose more than 21.2% to $21.0 billion, and Intermex processed approximately 47.8 million remittances.
• Operating margin was approximately 15.2% versus 14.8% in 2021; net margin was approximately 10.5% versus 10.2%. Service charges from agents and banks remained 67% of revenue. Salaries and benefits rose 21.3%, reflecting hiring, wage increases, acquisition-related costs and higher share-based compensation.
• Adjusted EBITDA, a non-GAAP measure, was $105.2 million, up 21.4%; adjusted net income was $69.9 million, up 21.6%. These measures exclude specified costs and should not be viewed as substitutes for GAAP results or cash flow.
• Cash and cash equivalents were $149.5 million at year-end, compared with $132.5 million. Current assets were $382.4 million and current liabilities $184.8 million. Operating cash flow fell mainly due to a $78.3 million working-capital impact, including timing-related changes in receivables and prepaid wires.
• Gross borrowings were $156.9 million at year-end: $80.9 million term debt and $76.0 million drawn on the revolving facility, versus $85.3 million total debt in 2021. An additional $144.0 million was available under the facilities. Debt bears variable rates; the company reported compliance with its financial covenants at year-end.

Material changes and notable items

• Intermex acquired La Nacional on November 1, 2022, for $41.0 million of reported consideration, including estimated contingent consideration. La Nacional contributed $13.3 million in revenue and $0.1 million net loss for the post-acquisition period included in FY2022 results. The acquisition added $13.5 million of goodwill.
• The LAN Holdings acquisition remained pending, with closing expected in Q2 2023 subject to customary conditions, including regulatory approvals. Management expected the combined acquisitions, once integrated, to contribute approximately $80–$90 million in annual revenue at a 9%–11% adjusted EBITDA margin; integration was expected to take four quarters after each closing.
• FY2022 investing cash use was $12.5 million, including $12.2 million of property and equipment purchases. Financing cash flow was $14.1 million, reflecting $76.0 million of net revolver borrowings and $53.7 million of common-stock repurchases, among other items.
• The company repurchased 2.48 million shares for $53.7 million during 2022, including a privately negotiated $27.6 million purchase of 1.17 million shares from SPC Intermex, LP. The board authorized an additional $100 million for repurchases in March 2023. No cash dividends were anticipated for the foreseeable future.
• Interest expense increased 24.1% to $5.6 million. In November 2022, the credit agreement replaced LIBOR with SOFR. A hypothetical one-percentage-point rate change on year-end borrowings would change annual cash interest expense by approximately $0.8 million.

Outlook, risks and contingencies

• No general company-wide revenue or earnings guidance is stated in the supplied filing text. Management said operating cash flows and revolver access were expected to be sufficient for principal debt payments, interest, working capital and anticipated capital expenditures for at least the next 12 months.
• The company identified inflation, recession and employment conditions, currency volatility, rising rates, competition from digital providers, agent and bank relationships, cybersecurity, fraud, regulatory compliance, and acquisition execution and integration as significant risks. Sustained appreciation of the Mexican peso or Guatemalan quetzal against the U.S. dollar could pressure revenue and profitability.
• Liquidity and counterparty risks merit attention: Elektra, the largest paying agent, handled approximately 24% of FY2022 remittance volume. A significant share of banking and paying-agent activity is concentrated among a limited number of institutions. The filing also noted that SVB held 13% of revolving-credit commitments and that its ability to fund its share was uncertain; Intermex believed remaining commitments would cover foreseeable working-capital needs if SVB did not fund.
• Intermex recorded a $1.6 million FY2022 provision related to deposits at a Mexican financial institution closed in 2021; cumulative valuation allowance was approximately $3.6 million against $5.2 million of exposure. The ultimate recovery and timing remained uncertain.
• Ordinary-course legal and regulatory matters were disclosed; management said it could not estimate loss probabilities or damages for certain proceedings and had not recorded reserves. Management did not expect regulatory examinations to have a material adverse effect. BDO issued unqualified opinions on the financial statements and internal control over financial reporting; the acquired La Nacional’s controls were excluded from the year-end assessment because of acquisition timing.

Most important facts for investors to verify

• Whether the sharp year-over-year decline in operating cash flow reflects temporary transaction timing or a more persistent working-capital requirement.
• LAN Holdings closing status, regulatory approvals, purchase consideration and whether the acquisitions achieve the stated revenue and adjusted EBITDA expectations after integration.
• Debt levels, covenant headroom, variable-rate exposure and the availability of revolver commitments given the disclosed SVB participation uncertainty.
• Exposure to Elektra and other concentrated agents or banks, and trends in agent receivable losses and collections.
• Execution and funding of the expanded share-repurchase authorization, including consistency with liquidity needs and credit-agreement restrictions.
• Recovery prospects for the Mexican bank deposits and any developments in unreserved litigation or regulatory matters.